Tax returns must report assets from FY13 as govt closes in on rich evaders

April, 30th 2013

People sitting on huge assets but paying little income tax may have reason to worry. In an ambitious bid to counter tax evasion, the government has decided to introduce a new income tax return form effective financial year 2012-13, that will require individuals to disclose all their assets and liabilities, rather than just annual income from various sources. The new return, therefore, will be a comprehensive balance sheet of assets and liabilities, disclosing ownership of houses, jewellery, urban land, motor cars and other personal effects such as yachts and aircraft, along with outstanding debt.The idea is to extend the scope of tax return to include information that is in the domain of wealth tax — a levy that has poor compliance history in the country. The department wants to zero in on individuals, mainly traders and businessmen, who disclose modest income, but own fancy SUVs, houses at posh locations and other assets that clearly do not agree with the reported income. Rich farmers who don’t report taxable income, other than agriculture income might escape the new reporting norm also, as farm income is not taxable, analysts say.At present, the requirement for individuals and Hindu Undivided Families to pay a wealth tax of 1% on ‘net wealth’ (total assets minus debt) above R30 lakh and file wealth tax returns is not strictly complied with. The country reported a wealth tax collection of just R866 crore in 2012-13, way below the budget estimate of R1,244 crore, itself a shadow of what